Question

g for every additional dollar in government purchases, aggregate demand will increase by , this effect is called

Answer 1

Answer:

The numbers are missing, but this question is about the government expenditure multiplier. The government expenditure multiplier measures how much does aggregate demand increase by every additional dollar spent by the government.

This concept is part of Keynesian economics, and you calculate the government multiplier using the following formula:

G multiplier = 1 / (1 - marginal propensity to consume MPC)

or

G multiplier = 1 / marginal propensity to save MPS